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World oil reserves edge down

First drop in decade

Claudia Cattaneo, Financial Post Published: Thursday, June 11, 2009

World oil reserves -- including Canada's oil sands under active development -- fell last year for the first time since 1998, BP PLC said yesterday, supporting a trend of bullish news that sent oil prices to a seven-month high.

In its annual statistical review of world energy, BP said proved oil reserves fell by three billion barrels to 1.258 trillion barrels by the end of 2008 from a revised 1.261 trillion at the end of 2007. Declines in countries including Russia, Norway and China offset increases in Vietnam, India and Egypt.

"Our data confirms the world has enough proved reserves of oil, natural gas and coal to meet the world's needs for decades to come," BP chief executive Tony Hayward said in an introduction to the review. "The challenges the world faces in growing supplies to meet future demand are not below ground, they are above ground. They are human, not geological."

Oil companies are challenged to replenish their reserves, as some countries have nationalized their oil industries, while others keep many areas off limits.

The BP review found global oil consumption declined by 0.6% last year, or 420,000 barrels per day, to 84.45 million b/d-- the first decline since 1993 and the largest decline since 1982.

OECD countries cut oil consumption by 1.5 million b/d, or 3.2%, led by a 6.4% decline, or 1.3 million b/d, in the United States, but consumption outside the OECD grew by 1.1 million b/d, BP said in the influential analysis of the world's latest energy trends.

"Primary energy consumption growth slowed in 2008," Mr. Hayward said. "All the net growth in energy consumption came from the rapidly industrializing non-OECD economies, with China alone accounting for nearly three-quarters of global growth."

Crude prices rose US$1.32 in New York yesterday, to US$71.33 a barrel, on an unexpected drop in U. S. inventories. Oil prices have risen 60% since the beginning of the year.

Alexei Miller, CEO of Russia's OAO Gazprom, said oil's gains show the rally that was interrupted by the financial crisis is resuming. In a speech in Italy, he said spikes above US$250 per barrel by 2012 are "realistic" due to a coming supply/demand imbalance.

Investment in the global oil-and-gas sector will fall by more than 20% this year, he said to the European Business Congress, because the financial crisis is causing producers to curtail spending for fear of price volatility. According to the BP review, Russia's reserves fell last year to 79 billion barrels, from 80.4 billion barrels in 2007.

"When we see that over the past weeks oil prices closed at around US$70, this is not a technical correction or accidental fluctuation, but a return to a pre-crisis trend," he said. "There are sufficient objective grounds for the oil price to rise to US$85 a barrel by year-end."

Meanwhile, BP found world oil production was 0.4% higher in 2008, or 81.82 million b/d, led by increases by OPEC producers.

"In 2008, the world was no longer supply constrained, as production growth exceeded that of consumption for all fossil fuels, particularly later in the year," Mr. Hayward said.

Supplies from Canada declined 2% to 3.2 million b/d. Supplies produced in the United States were off 1.8%, to 6.7 million b/d.

Oil and gasoline prices rose yesterday after the U. S. Energy Department said stockpiles of oil dropped 4.38 million barrels, to 361.6 million, in the week ended June 5.

BP said Canada's proved oil reserves --including oil sands under active development -- stayed the same year over year, at 28.6 billion barrels.

Scores of oil-sands projects were cancelled or delayed last year due to the oil-price collapse.

Canada's reserves are barely below those remaining in the United States, pegged at 30.5 billion barrels.

BP included in a separate category Canada's oil sands that are not under active development. They are estimated at 150.7 billion barrels, unchanged from 2007.

When the two categories are added up, BP estimates Canada's total oil reserves are 179.3 billion barrels -- the world's second-largest after Saudi Arabia, estimated to hold 264.1 billion barrels, slightly lower than in 2007.

The British oil major started including the oil sands in its estimate of world reserves only last year. Before that, the company took a narrower view that included only deposits under active development. BP entered the oil-sands business at the end of 2007 with a joint venture with Husky Energy Inc.

ccattaneo@nationalpost.com